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Universal Insurance Holdings Reports Second Quarter 2021 Results

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·13 min read
In this article:
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  • 2Q21 total revenue up 10.5% to $279.2 million

  • 2Q21 direct premiums written up 17.0%

  • 2Q21 diluted GAAP earnings per share ("EPS") of $0.70, non-GAAP adjusted EPS1 of $0.65

  • 2Q21 combined ratio of 97.3%

  • 2Q21 annualized return on average equity of 18.7%

  • Florida primary average rate increase of 14.9% for UPCIC filed during 2Q21

FORT LAUDERDALE, Fla., July 28, 2021--(BUSINESS WIRE)--Universal Insurance Holdings (NYSE: UVE) (the "Company") reported 2021 second quarter diluted EPS of $0.70 on a GAAP basis and $0.65 on a non-GAAP1 adjusted basis. Quarterly direct premiums written were up 17.0% from the year-ago quarter to $473.6 million, with an annualized return on average equity of 18.7%.

1

Excludes net realized and unrealized gains and losses on investments as well as extraordinary reinstatement premiums and associated commissions ("non-GAAP adjusted EPS"). Reconciliations of GAAP to non-GAAP financial measures are provided in the attached tables.

"We delivered solid second quarter results, highlighted by an 18.7% annualized return on average equity, despite continued social inflation within the state of Florida impacting loss costs," said Stephen J. Donaghy, Chief Executive Officer. "We continue to address these trends, in part, with primary rate increase filings, which was a driver of our direct written premium growth during the quarter. We expect primary rate increases to be a tailwind over the medium to long term as they earn-in, but are relentlessly focused on performing through the near term pressure on carriers in the Florida property insurance marketplace, and lament about the unfortunate derivative consequence of price increases on consumers."

Summary Financial Results

($thousands, except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

Change

2021

2020

Change

(GAAP comparison)

Total revenue

$

279,181

$

252,704

10.5

%

$

541,938

$

487,979

11.1

%

Income (loss) before income taxes

30,059

27,438

9.6

%

66,410

55,022

20.7

%

Income (loss) before income taxes margin

10.8

%

10.9

%

(10.0

)bps

12.3

%

11.3

%

1.0

pt

Diluted EPS

$

0.70

$

0.62

12.9

%

$

1.54

$

1.23

25.2

%

Annualized return on average equity (ROE)

18.7

%

15.6

%

3.1

pts

20.7

%

15.5

%

5.2

pts

Book value per share, end of period

$

15.37

$

16.56

(7.2

)%

$

15.37

$

16.56

(7.2

)%

(Non-GAAP comparison)2

Adjusted operating income

28,372

23,416

21.2

%

64,695

58,777

10.1

%

Adjusted EPS

$

0.65

$

0.52

25.0

%

$

1.50

$

1.32

13.6

%

2 Reconciliation of GAAP to non-GAAP financial measures are provided in the attached tables. Adjusted operating income excludes net realized and unrealized gains and losses on investments, interest expense, and extraordinary reinstatement premiums and associated commissions. Non-GAAP adjusted EPS excludes net realized and unrealized gains and losses on investments, as well as extraordinary reinstatement premiums and associated commissions.

Total revenue grew double digits for the quarter driven primarily by rate increases from 2020 earning through the book as policies renew, an increase in policies-in-force when compared to the prior years quarter, and commissions earned on ceded premiums. Total revenue growth was partially offset by the impact of higher reinsurance costs when compared to 2020 and the investment portfolio’s performance. GAAP diluted EPS and non-GAAP adjusted EPS results for the quarter were driven primarily by an improvement in weather events when compared to the prior years quarter, and the benefit of a reduced share count, partially offset by the impact of loss cost trends on prior and current accident years. The Company produced an annualized return on average equity of 18.7%.

Underwriting

($thousands, except policies in force)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

Change

2021

2020

Change

Policies in force (as of end of period)

977,251

937,277

4.3

%

977,251

937,277

4.3

%

Premiums in force (as of end of period)

$

1,618,576

$

1,389,703

16.5

%

$

1,618,576

$

1,389,703

16.5

%

Direct premiums written

$

473,627

$

404,685

17.0

%

$

838,941

$

739,238

13.5

%

Direct premiums earned

392,574

337,639

16.3

%

768,180

663,590

15.8

%

Net premiums earned

256,172

226,370

13.2

%

499,477

447,199

11.7

%

Expense ratio3

32.0

%

32.6

%

(60.0

)bps

32.9

%

32.8

%

10.0

bps

Loss & LAE ratio

65.3

%

66.9

%

(1.6

)pts

62.3

%

64.0

%

(1.7

)pts

Combined ratio

97.3

%

99.5

%

(2.2

)pts

95.2

%

96.8

%

(1.6

)pts

3 Expense ratio excludes interest expense.

Direct premiums written were up 17.0% for the quarter, led by direct premium growth of 19.6% in Florida.

On the expense side, the combined ratio improved 2.2 points for the quarter. The improvement was driven primarily by decreased weather events, partially offset by prior year's reserve development, current year strengthening and higher reinsurance costs impact on the ratio.

  • The expense ratio decreased 1.0 pointon a direct premiums earned basis due to continued focus on operating efficiencies, which was partially offset by the impact of increased reinsurance costs on the net ratio, resulting in a 60 basis point improvement in the net expense ratio for the quarter.

  • The net loss and LAE ratio improved 1.6 points for the quarter. Quarterly drivers include:

    • A 7.5 point net improvement related to no weather events being above plan.

    • Adverse prior year’s reserve development of $7.7 million ($0.5 million in 2Q20) resulted in a 2.8 point net increase for the quarter. Net adverse development in the current quarter was driven primarily by continued adjusting and settlement of non-CAT claims on prior accident years.

    • Core losses of $159.5 million for the quarter ($133.9 million in 2Q20) resulted in a 90 basis point increase on a direct premium earned basis, driven by current year strengthening, which was further magnified by the impact of increased reinsurance costs on the net ratio, which led to a 3.1 point increase for the quarter on a net basis.

Services

($thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

Change

2021

2020

Change

Commission revenue

$

9,860

$

7,758

27.1

%

$

18,986

$

14,773

28.5

%

Policy fees

6,575

6,546

0.4

%

11,962

12,086

(1.0

)%

Other revenue

1,991

1,812

9.9

%

3,896

4,594

(15.2

)%

Total

$

18,426

$

16,116

14.3

%

$

34,844

$

31,453

10.8

%

Total services revenue increased 14.3% for the quarter. The increase was primarily driven by commission revenue earned on ceded premiums.

Investments

($thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

Change

2021

2020

Change

Net investment income

$

2,858

$

6,179

(53.7

)%

$

5,844

$

13,013

(55.1

)%

Realized gains (losses)

496

168

195.2

%

1,038

467

122.3

%

Unrealized gains (losses)

1,229

3,871

(68.3

)%

735

(4,153

)

NM

NM = Not Meaningful

Net investment income decreased 53.7% for the quarter. The decrease is largely attributable to significantly lower yields on the reinvested portfolio following the sale of a majority of securities in the portfolio that were in an unrealized gain position in the third and fourth quarters of 2020.

Capital Deployment

On July 19, 2021, the Board of Directors declared a quarterly cash dividend of 16 cents per share of common stock, payable on August 9, 2021, to shareholders of record as of the close of business on August 2, 2021.

Guidance

The Company is maintaining its guidance for 2021 (assuming no further extraordinary weather events and no realized or unrealized gains in 2021):

  • GAAP and Non-GAAP Adjusted EPS in a range of $2.75 - $3.00

  • Annualized return on average equity in a range of 17.0% - 19.0%

Conference Call and Webcast

  • Thursday, July 29, 2021 at 9:00 a.m. ET

  • U.S. Dial-in Number: (855) 752-6647

  • International: (503) 343-6667

  • Participant code: 5571912

  • Listen to live webcast: UniversalInsuranceHoldings.com

  • Replay of the call will be available on the UVE website and by phone at (855) 859-2056 or internationally at (404) 537-3406 using the participant code: 5571912 through August 13, 2021

About Universal Insurance Holdings, Inc.

Universal Insurance Holdings (UVE) is a holding company offering property and casualty insurance and value-added insurance services. We develop, market, and write insurance products for consumers predominantly in the personal residential homeowners lines of business and perform substantially all other insurance-related services for our primary insurance entities, including risk management, claims management and distribution. We sell insurance products through both our appointed independent agents and through our direct online distribution channels in the United States across 19 states (primarily Florida). Learn more at UniversalInsuranceHoldings.com.

Non-GAAP Financial Measures and Key Performance Indicators

This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the U.S. Securities and Exchange Commission ("SEC"), including adjusted earnings per diluted share, which excludes the impact of the net realized and unrealized gains and losses on investments as well as extraordinary reinstatement premiums and associated commissions. Extraordinary reinstatement premiums are not covered by reinstatement premium protection and attach just below the Florida Hurricane Catastrophe Fund ("FHCF") reinsurance layer. Adjusted operating income excludes the impact of the net realized and unrealized gains and losses on investments, as well as interest expense and extraordinary reinstatement premiums and associated commissions. A "non-GAAP financial measure" is generally defined as a numerical measure of a company’s historical or future performance that excludes or includes amounts, or is subject to adjustments, so as to be different from the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles ("GAAP"). UVE management believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. UVE management also believes that these non-GAAP financial measures enhance the ability of investors to analyze UVE’s business trends and to understand UVE’s performance. UVE’s management utilizes these non-GAAP financial measures as guides in long-term planning. Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures presented in accordance with GAAP. For more information regarding our key performance indicators, please refer to the section titled "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators" in our forthcoming Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.

Forward-Looking Statements

This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "anticipate," "will," "plan," and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Such statements may include commentary on plans, products and lines of business, marketing arrangements, reinsurance programs and other business developments and assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, including those risks and uncertainties described under the heading "Risk Factors" and "Liquidity and Capital Resources" in our 2020 Annual Report on Form 10-K, and supplemented in our subsequent Quarterly Reports on Form 10-Q. Future results could differ materially from those described, and the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For further information regarding risk factors that could affect the Company’s operations and future results, refer to the Company’s reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K and the most recent quarterly reports on Form 10-Q.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)

June 30,

December 31,

2021

2020

ASSETS:

Invested Assets

Fixed maturities, at fair value

$

921,800

$

819,861

Equity securities, at fair value

95,690

84,887

Assets held for sale

7,053

Investment real estate, net

5,981

15,176

Total invested assets

1,030,524

919,924

Cash and cash equivalents

286,493

167,156

Restricted cash and cash equivalents

6,134

12,715

Prepaid reinsurance premiums

532,308

215,723

Reinsurance recoverable

196,294

160,417

Premiums receivable, net

74,072

66,883

Property and equipment, net

53,023

53,572

Deferred policy acquisition costs

115,971

110,614

Goodwill

2,319

2,319

Other assets

44,397

49,418

TOTAL ASSETS

$

2,341,535

$

1,758,741

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:

Unpaid losses and loss adjustment expenses

$

278,658

$

322,465

Unearned premiums

853,896

783,135

Advance premium

68,287

49,562

Reinsurance payable, net

581,818

10,312

Long-term debt

7,721

8,456

Other liabilities

70,313

135,549

Total liabilities

1,860,693

1,309,479

STOCKHOLDERS' EQUITY:

Cumulative convertible preferred stock ($0.01 par value) 4

Common stock ($0.01 par value) 5

470

468

Treasury shares, at cost - 15,695 and 15,680

(225,751

)

(225,506

)

Additional paid-in capital

105,904

103,445

Accumulated other comprehensive income (loss), net of taxes

(5,571

)

3,343

Retained earnings

605,790

567,512

Total stockholders' equity

480,842

449,262

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,341,535

$

1,758,741

Notes:

4 Cumulative convertible preferred stock ($0.01 par value): Authorized - 1,000 shares; Issued - 10 and 10 shares; Outstanding - 10 and 10 shares; Minimum liquidation preference - $9.99 and $9.99 per share.

5 Common stock ($0.01 par value): Authorized - 55,000 shares; Issued - 46,964 and 46,817 shares; Outstanding 31,269 and 31,137 shares.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

REVENUES

Net premiums earned

$

256,172

$

226,370

$

499,477

$

447,199

Net investment income

2,858

6,179

5,844

13,013

Net realized gains/(losses) on investments

496

168

1,038

467

Net change in unrealized gains/(losses) of equity securities

1,229

3,871

735

(4,153

)

Commission revenue

9,860

7,758

18,986

14,773

Policy fees

6,575

6,546

11,962

12,086

Other revenue

1,991

1,812

3,896

4,594

Total revenues

279,181

252,704

541,938

487,979

EXPENSES

Losses and loss adjustment expenses

167,221

151,345

311,184

286,393

Policy acquisition costs

56,766

48,524

113,224

95,388

Other operating expenses

25,097

25,380

51,062

51,107

Interest expense

38

17

58

69

Total expenses

249,122

225,266

475,528

432,957

Income before income tax expense

30,059

27,438

66,410

55,022

Income tax expense (benefit)

8,118

7,556

18,061

15,073

NET INCOME

$

21,941

$

19,882

$

48,349

$

39,949

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SHARE AND PER SHARE INFORMATION

(in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Weighted average common shares outstanding - basic

31,240

32,102

31,224

32,347

Weighted average common shares outstanding - diluted

31,310

32,170

31,292

32,440

Shares outstanding, end of period

31,269

31,853

31,269

31,853

Basic earnings (loss) per common share

$

0.70

$

0.62

$

1.55

$

1.23

Diluted earnings (loss) per common share

$

0.70

$

0.62

$

1.54

$

1.23

Cash dividend declared per common share

$

0.16

$

0.16

$

0.32

$

0.32

Book value per share, end of period

$

15.37

$

16.56

$

15.37

$

16.56

Annualized return on average equity (ROE)

18.7

%

15.6

%

20.7

%

15.5

%

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SUPPLEMENTARY INFORMATION

(in thousands, except for Policies In Force data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Premiums

Direct premiums written - Florida

$

400,370

$

334,769

$

707,381

$

613,280

Direct premiums written - Other States

73,257

69,916

131,560

125,958

Direct premiums written - Total

$

473,627

$

404,685

$

838,941

$

739,238

Direct premiums earned

$

392,574

$

337,639

$

768,180

$

663,590

Net premiums earned

$

256,172

$

226,370

$

499,477

$

447,199

Underwriting Ratios - Net

Loss and loss adjustment expense ratio

65.3

%

66.9

%

62.3

%

64.0

%

Policy acquisition cost ratio

22.2

%

21.5

%

22.7

%

21.4

%

Other operating expense ratio6

9.8

%

11.2

%

10.2

%

11.4

%

General and administrative expense ratio6

32.0

%

32.6

%

32.9

%

32.8

%

Combined ratio

97.3

%

99.5

%

95.2

%

96.8

%

Other Items

(Favorable)/Unfavorable prior year's reserve development

$

7,731

$

478

$

6,494

$

4,819

Points on the loss and loss adjustment expense ratio

300

bps

21

bps

130

bps

108

bps

6 Expense ratio excludes interest expense.

As of

June 30,

2021

2020

Policies in force

Florida

723,390

696,829

Other States

253,861

240,448

Total

977,251

937,277

Premiums in force

Florida

$

1,345,532

$

1,144,326

Other States

273,044

245,377

Total

$

1,618,576

$

1,389,703

Total Insured Value

Florida

$

200,600,028

$

177,854,339

Other States

112,637,726

99,662,951

Total

$

313,237,754

$

277,517,290

Three Months Ended June 30, 2021

Direct

Loss
Ratio

Ceded

Loss
Ratio

Net

Loss
Ratio

Premiums earned

$

392,574

$

136,402

$

256,172

Loss and loss adjustment expenses:

Core losses

$

159,412

40.6

%

$

(78)

(0.1)

%

$

159,490

62.3

%

Weather events7

%

%

%

Prior year’s reserve development

116,890

29.8

%

109,159

80.0

%

7,731

3.0

%

Total losses and loss adjustment expenses

$

276,302

70.4

%

$

109,081

80.0

%

$

167,221

65.3

%

7 Includes only current year weather events beyond those expected.

Six Months Ended June 30, 2021

Direct

Loss
Ratio

Ceded

Loss
Ratio

Net

Loss
Ratio

Premiums earned

$

768,180

$

268,703

$

499,477

Loss and loss adjustment expenses:

Core losses

$

304,640

39.7

%

$

(50)

%

$

304,690

61.0

%

Weather events7

%

%

%

Prior year’s reserve development

208,960

27.2

%

202,466

75.3

%

6,494

1.3

%

Total losses and loss adjustment expenses

$

513,600

66.9

%

$

202,416

75.3

%

$

311,184

62.3

%

7 Includes only current year weather events beyond those expected.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, except for per share data)

Three Months Ended

Six Months Ended

Guidance

June 30,

June 30,

Full Year 2021E

2021

2020

2021

2020

Income (Loss) Before Income Taxes

$

30,059

$

27,438

$

66,410

$

55,022

Adjustments:

Reinstatement premium, net of commissions8

Net unrealized (gains)/losses on equity securities

(1,229

)

(3,871

)

(735

)

4,153

Net realized (gains)/losses on investments

(496

)

(168

)

(1,038

)

(467

)

Interest Expense

38

17

58

69

Total Adjustments

(1,687

)

(4,022

)

(1,715

)

3,755

Non-GAAP Adjusted Operating Income

$

28,372

$

23,416

$

64,695

$

58,777

GAAP Diluted EPS

$

0.70

$

0.62

$

1.54

$

1.23

$ 2.75 - 3.00

Adjustments:

Reinstatement premium, net of commissions8

Net unrealized (gains)/losses on equity securities

(0.04

)

(0.12

)

(0.02

)

0.12

Net realized (gains)/losses on investments

(0.02

)

(0.01

)

(0.03

)

(0.01

)

Total Pre-Tax Adjustments

(0.06

)

(0.13

)

(0.05

)

0.11

Income Tax on Above Adjustments

0.01

0.03

0.01

(0.02

)

Total Adjustments

(0.05

)

(0.10

)

(0.04

)

0.09

Non-GAAP Adjusted EPS

$

0.65

$

0.52

$

1.50

$

1.32

$ 2.75 - 3.00

8 Includes extraordinary reinstatement premiums not covered by reinstatement premium protection and related commissions.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210728005826/en/

Contacts

Investor Relations Contact:
Rob Luther, 954-958-1200 ext. 6750
VP, Corporate Development, Strategy & IR
rluther@universalproperty.com

Media Relations Contact:
Andy Brimmer / Mahmoud Siddig, 212-355-4449
Joele Frank, Wilkinson Brimmer Katcher

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